Why Bitcoin Will Never Have A Problem With Deflationhttp://www.businessinsider.com/bitcoin-doesnt-have-a-deflation-problem-2014-2/comments
en-usWed, 31 Dec 1969 19:00:00 -0500Fri, 09 Dec 2016 11:46:36 -0500Joe Weisenthalhttp://www.businessinsider.com/c/52f473296da811675415701dJim RockyFri, 07 Feb 2014 00:46:17 -0500http://www.businessinsider.com/c/52f473296da811675415701d
The amount of Bitcoin supporters who are absolutely clueless about basic economics is staggering.http://www.businessinsider.com/c/52f3b9146da811e93415701eMorgenThu, 06 Feb 2014 11:32:20 -0500http://www.businessinsider.com/c/52f3b9146da811e93415701e
"Suppose I own a lot of Bitcoins because I believe the price will continue to rise, should I be reluctant to make a Bitcoin-based purchase and part with some of my coins? Nah. If there's a purchase that makes sense for me to do in Bitcoin (such as buy chips in an online casino) I'll do that, and then just replenish my pile with the amount that I spent. No big deal."
I don't think it's quite as simple as you're making it out to be. People are paying exchange fees every time they "replenish," and that changes the calculus for determining what kind of Bitcoin-based purchases might have been "worth it" to begin with. And yet, if we assume a world in which Bitcoin is so easy to get our hands on, perhaps by taking part of our salaries in Bitcoin, then we're operating in the dubious scenario you describe at the end of your post, where cryptocurrencies edge out fiat. I'm not saying I can see where this is all headed. I'm just not really convinced by your logic.http://www.businessinsider.com/c/52f398c569beddaa490330e1DDUThu, 06 Feb 2014 09:14:29 -0500http://www.businessinsider.com/c/52f398c569beddaa490330e1
I was considering the case where bitcoins are in widespread use. I am interested in understanding the possibility of this happening given its current design
If someone would rather pay me in $, then bitcoins are not in widespread use. And I agree with you, if it there is not a possibility that it will be used like that, it will not become 3x worth.http://www.businessinsider.com/c/52f397da69bedd3b460330e7DDUThu, 06 Feb 2014 09:10:34 -0500http://www.businessinsider.com/c/52f397da69bedd3b460330e7
Let's assume a world where bitcoins are in widespread use and the dominant currency. In a healthy economy, the economic growth/productivity gain is let's say 3% a year. One money item that would give you X amount of production one year would give you 1.03X the next - i.e. deflation.
There are problems with this. For example, your student loan of 10 money items when you took it would suddenly correspond to 14 money items when it is time to pay it back, making it less likely that you would do these types of investments. That is why economists typically view deflation as devastating for economic growth.
A currency cannot be seen in isolation if it is supposed to be in widespread use, it needs to be adapted to the real economy and real economic decisions.http://www.businessinsider.com/c/52f394b369beddab33033100DDUThu, 06 Feb 2014 08:57:07 -0500http://www.businessinsider.com/c/52f394b369beddab33033100
And what about debt? In a deflationary world debts increase over time. Why would any businesses take on a loan and invest when it would essentially be like asking the maffia for a loan? This would prevent any investments except the secure. Why would I buy a house before I have all the money? essentially preventing me from moving or removing the entire housing market as we know it. Why would this not be devastating for economic growth?
There are only a few episodes in history where deflation has not been damaging to the economy - why would bitcoin suddenly solve all problems associated with it?http://www.businessinsider.com/c/52f39080eab8eacd0d6ea835Mathias AeschlimannThu, 06 Feb 2014 08:39:12 -0500http://www.businessinsider.com/c/52f39080eab8eacd0d6ea835
Yeah, and why would anyone pay you in bitcoins if he could pay you in $? Anyway, without the possibility of usage, a bitcoin is just a boring sequnce of bits and very unlikely to sustainably become 3x worth.http://www.businessinsider.com/c/52f38f1a6da811fa78157017Mathias AeschlimannThu, 06 Feb 2014 08:33:14 -0500http://www.businessinsider.com/c/52f38f1a6da811fa78157017
We're not in a period of deflation so your point is mood. But yeah, economic activity doesn't per se slow down during deflation, in fact, historical evidence tells otherwise, fe economic growth was at a record in the us during the deflation towards the end of the 19th century.http://www.businessinsider.com/c/52f31ec2eab8eae1774c8cdeWingedThu, 06 Feb 2014 00:33:54 -0500http://www.businessinsider.com/c/52f31ec2eab8eae1774c8cde
Supposing for a moment that bitcoin were the only global currency you would see 2-3% deflation per year as the finite bitcoin supply increased in value to represent the new actual wealth created that year.
You could try to use the argument that people will put off purchases till later because their currency is increasing in value, but this argument is flawed as someone's "later" will be someone else's "now." And the system will just keep churning a long like normal.
I mean a lot of investments will provide a lot higher return than 3% per year, and you don't see them causing any demand problems in the consumer market. This whole concept of inflation being good was invented by bankers to pressure you to put your money where it will gain interest because, pro tip: they want to get their hands on your money.
Call me radical, but I think we'd be a lot better off if people's "cash" savings were completely denominated in something like bitcoin and secured by the individual. This would allow interest rates to properly factor in risk, and not be artificially low by the influx of everyone's cash mismanaged by the banks.
I also think 2008 was just the overture and we're in big trouble, would love to be wrong about that, etc.http://www.businessinsider.com/c/52f2d8a269bedd607e4c8ce2jsonWed, 05 Feb 2014 19:34:42 -0500http://www.businessinsider.com/c/52f2d8a269bedd607e4c8ce2
Bitcoins would not be worth 3x the amount. The only factor driving deflation would be lost coins, which would give us extremely slow deflation.
Also, if you are comparing USD to BTC, BTC will always "gain value", not because it is actually is gaining value but because the dollar is being inflated. If you see BTC being the dominant currency (as it should be because it is far more stable) and watch the price of paper dollars drop as they print them, then you get a clearer picture of whats going on.http://www.businessinsider.com/c/52f25bda6bb3f70723c251abDDUWed, 05 Feb 2014 10:42:18 -0500http://www.businessinsider.com/c/52f25bda6bb3f70723c251ab
Let's say I pay someone a salary of Y bitcoins resulting in a profit of let's say 2x that amount a year from now.
Why would I do that if those bitcoins will at the same time be worth 3x the amount a year from now.
If I want to pay for work etc, it makes much more sense for me to pay in dollars. That won't lead to any bitcoins ending up in the worker's pocket and preventing widespread use.
The worker on his part won't care how you send the dollars, but I'm pretty sure he doesn't want to be charged an extra 10% in currency conversion fees at a shady exchange.http://www.businessinsider.com/c/52f22f4deab8eabb1dc251acNikolayWed, 05 Feb 2014 07:32:13 -0500http://www.businessinsider.com/c/52f22f4deab8eabb1dc251ac
BTC 1BUj48zX8m1kVoMamwawGNC3gawQN3s3Ns
LTC Lb7T4a8L9RNKDC6hq5dD4LbkNgutbiy16r
Help for
the treatment of a daughter!, She had cancer, but I have no money that would
save her. Put the news in other forumshttp://www.businessinsider.com/c/52f22c2ceab8ea9312c251adCarlosCarlosWed, 05 Feb 2014 07:18:52 -0500http://www.businessinsider.com/c/52f22c2ceab8ea9312c251ad
Bravo! You now finally get it!http://www.businessinsider.com/c/52f1b4db6da8118d6c36a7dabubbuahotepTue, 04 Feb 2014 22:49:47 -0500http://www.businessinsider.com/c/52f1b4db6da8118d6c36a7da
I knew you'd eventually come around to our side Joe.http://www.businessinsider.com/c/52f19bb46da811d77b36a7d4PPTue, 04 Feb 2014 21:02:28 -0500http://www.businessinsider.com/c/52f19bb46da811d77b36a7d4
You miss the fact that the smallest unit for Bitcoin is fixed at 1/100000000 btc. No problem, you say.. they can change that.. by fiat?http://www.businessinsider.com/c/52f19931ecad04760c36a7d9tivoboyTue, 04 Feb 2014 20:51:45 -0500http://www.businessinsider.com/c/52f19931ecad04760c36a7d9
Good at math, not at the fundamentals of what makes a foundational payment system. Price of Bitcoin could literally, go to zero. That is NOT not a deflation problem.http://www.businessinsider.com/c/52f198e16da8117e6e36a7d4lang.lee.3994Tue, 04 Feb 2014 20:50:25 -0500http://www.businessinsider.com/c/52f198e16da8117e6e36a7d4
ponzicoin! the only problem is if to many people try to sell this junk at the same time!http://www.businessinsider.com/c/52f198696da811896e36a7d9Bureau of Lying StatisticiansTue, 04 Feb 2014 20:48:25 -0500http://www.businessinsider.com/c/52f198696da811896e36a7d9
"If that were to happen and it became the currency (it won't) then it would have a deflation problem."
You're such a tool, Joe. Deflation isn't a problem. It's a productivity bonus to consumers. Back when this country still had a robustly growing economy, we had negative inflation rates for most basic items. You only need inflation to enable banksters to nibble every last bit of meat off the bone in the credit markets.
Repeat after me:
"Inflation is regressive taxation. It steals from earners and savers, and rewards userers and layabouts."
That's all it does. Bitcoin is the same as Federal Reserve Notes. They're both valueless trading chits. Neither is backed by anything more or anything less than what it will purchase on the open market. The only difference is, one is steadily gaining trade value, and the other isn't even good for toilet paper anymore.http://www.businessinsider.com/c/52f198246da8111a6f36a7d2BitBillionsTue, 04 Feb 2014 20:47:16 -0500http://www.businessinsider.com/c/52f198246da8111a6f36a7d2
Thanks Joe for the informative article. Butcoin will never actually replace the dollar but can be used as a store of value or hedge!
want some Bitcoins for little or no investment?
<a href="http://www.bitbillions.com/?refid=1LXxS1ht74BrnuwtiaBVgC9xrS25sVykzT" target="_blank" rel="nofollow" >http://www.bitbillions.com/?refid=1LXxS1ht74BrnuwtiaBVgC9xrS25sVykzT</a>http://www.businessinsider.com/c/52f194436bb3f7656636a7d2jomamammamamTue, 04 Feb 2014 20:30:43 -0500http://www.businessinsider.com/c/52f194436bb3f7656636a7d2
"This argument stems from the correct argument that economists make about national fiat currencies, which is that when you're in a period of deflation (characterized by falling prices and a rising currency) economic activity slows down, because you'll have more buying power tomorrow than you did today, and so what's the rush to spend?"
Then why do people buy, cellphones, flat screens, lap tops, blu ray players, microwaves, notepads, etc..???http://www.businessinsider.com/c/52f190e2ecad047c7236a7d4GPTue, 04 Feb 2014 20:16:18 -0500http://www.businessinsider.com/c/52f190e2ecad047c7236a7d4
Felix beat you too it....
"There’s a lot to be said for a fast, efficient, peer-to-peer payments system which bypasses centers of authority and which has negligible transaction costs. It just doesn’t need to be its own currency."
<a href="https://medium.com/money-banking/2b5ef79482cb" target="_blank" rel="nofollow" >https://medium.com/money-banking/2b5ef79482cb</a>
But like he says, what you two are both describing is a payments system, NOT a currency.